A unanimous Full Federal Court has held that a computer implemented method of creating an investment index is not patentable, on the basis that the substance of the claimed invention – an abstract idea or scheme – was itself not patentable subject matter and simply implementing that invention via a computer would not render it patentable.
In Research Affiliates LLC v Commissioner of Patents FCAFC 150, the Full Court had to determine whether the use of a computer to implement an otherwise unpatentable business method was sufficient to render that method patentable. In finding that the use of a computer was not sufficient, the Full Court emphasised that:
- a Court will focus on the substance of the invention when it is asked to assess whether a claimed invention is patentable; and
- where a claimed invention is otherwise unpatentable, a computer must be important, if not integral, to the implementation of the claimed invention.
The Full Court’s decision confirms that use of a computer will not, of itself, transform an idea or method into a patentable invention.
The existing legal position
To obtain a patent under Australian law, the applicant must satisfy the Commissioner of Patents that the claimed invention is (among other requirements) a “manner of manufacture within the meaning of section 6 of the Statute of Monopolies” (Patents Act 1990 (Cth), section 18(1)(a)). The term “manner of manufacture” is the expression used to determine whether something is patentable subject matter or not. For example, a new fuel pump or drug is regarded as a “manner of manufacture”; a new poem or song is not.
A claimed invention is a manner of manner of manufacture if:
- it involves an artificially created state of affairs in a field of economic or commercial endeavour; and
- it produces some physical effect.
Case law says that a method or process will not satisfy these requirements if that method or process is a mere scheme, an abstract idea or mere information which does not produce an artificial state of affairs, in the sense of some concrete, tangible, physical or observable effect.
The patent applications
Research Affiliates is the applicant for two patents which claim a computer-implemented method for generating a financial index. The index is generated by:
- accessing data relating to a number of assets (e.g., share price information for ASX-listed securities);
- processing the data to identify a selection of assets for inclusion in the index by some objective measure (other than share price, market capitalisation or a combination of those measures);
- accessing a weighting function to weight the selected assets; and
- applying that weighting function to assign each asset a weight, based on some objective measure (other than share price, market capitalisation or a combination of those measures), to generate an index.
Using this method, Research Affiliates has generated indices and licensed those indices to banks, fund managers and asset owners.
The road to the Full Court
In December 2010 and December 2011, a delegate of the Commissioner of Patents refused the patent applications on the basis that the claimed inventions of the applications were not to a manner of manufacture and thus did not comply with section 18(1)(a) of the Act.
Research Affiliates appealed the delegate’s decisions to the Federal Court. In a decision handed down in February 2013 (Research Affiliates LLC v Commissioner of Patents (2013) 300 ALR 724;  FCA 71), Justice Emmett dismissed the appeals, finding that the claimed invention was not a manner of manufacture.
In reaching this conclusion, his Honour found that the index generated by the method was nothing more than a set of data (information) and that the method itself did not involve any specific effect being generated by a computer (i.e., there was no practical application for the improved use of the computer). In his Honour’s view, “[t]he implementation of the method of the claimed invention by means of a computer, at the level articulated in claim 1, is no more than the modern equivalent of writing down the index on pieces of paper.” Thus, in his Honour’s opinion, there could not be a patentable invention. In reaching his decision, Justice Emmett took various factors into consideration, including that:
- the patent specification provided few details about the computer processing steps;
- the claimed method did not improve the operation of or effect of the use of a computer; and
- the claimed method could readily have been “carried out manually”, the computer implementation being merely “no more than the use of a computer for a purpose for which it is suitable”.
Research Affiliates appealed Justice Emmett’s decision to the Full Court of the Federal Court.
The Full Court’s decision
The central question, framed for determination by the Full Court, was “whether computer implementation of an otherwise unpatentable business scheme was sufficient to make the claimed method properly the subject of letters patent.” The Full Court held that it was not and in so finding dismissed Research Affiliates’ appeal and affirmed Justice Emmett’s decision.
In making its ultimate finding that the claimed invention was not patentable, the Full Court makes a number of significant statements.
First, the Full Court emphasises the distinction between the mere implementation of an abstract idea in a computer and the implementation of an abstract idea in a computer which results in an improvement in the computer. The Full Court expressed its support for the idea that where a claimed invention is otherwise unpatentable, a computer must be important, if not integral, to the claimed invention – so much so that the claimed invention must create an improvement in the computer, for example.
Second, the Full Court rejects Research Affiliates’ submission that the implementation of an abstract idea or scheme in a well-known machine is sufficient to render that idea or scheme patentable because it gives rise to an artificial effect. Noting, on the evidence, that the claimed method is not “foreign to the normal use of computers” and that ingenuity lies in the scheme, the Full Court finds that simply writing information to the computer’s memory is insufficient to constitute an artificially created state of affairs. The Full Court notes that the approach endorsed by Research Affiliates was “inconsistent with NRDC and is one of form not substance.”
Third, the Full Court explains that the claimed invention “is to be understood as a matter of substance and not merely as a matter of form.” In the case before it, when looking at the substance of the invention as disclosed by the specification, the Full Court notes that the computer is described as simply the means used to access data to generate an index. In its decision, the Full Court remarks on the lack of detail in the specification regarding the computer implementation of the generation of the index.
The Full Court returns to the need to examine the substance of invention toward the end of its reasons. It explains that in examining whether a claimed invention is properly the subject of letters patent, “it is necessary to look not only at the integers of that claimed invention but also at the substance of that invention”. While the Court remarks that computer-implementation is an essential integer of the process, and that that factor may be important in other contexts (such as novelty and infringement), the substance of the invention is what the Court must examine when it comes to assessing whether a claimed invention constitutes a manner of manufacture under the Act.
Ramifications of the Full Court’s decision
There is no doubt that banks, fund managers and other financial services businesses are looking for ways to pull ahead of their competitors. Patents that can protect a new business method, financial product or way of gathering and processing information can help those businesses achieve that edge. However, as this case shows, applications for such patents will be carefully scrutinised.
While the Court’s finding that the mere implementation of an abstract idea in a computer (as opposed to the implementation of an abstract idea in a computer to create an improvement in the computer) is not patentable is uncontroversial, two aspects of the method of analysis adopted by the Full Court are noteworthy. First, is the focus on the “substance of the invention”, and the second is whether the involvement of a computer is sufficiently essential to make the invention patentable. With regard to the approach taken by the Full Court in this case, patent applicants should ensure (to the extent it is possible to do so) that their applications emphasise the role and involvement of a computer as well as any technical steps performed by a computer, and the advantages of the invention to the computer.
Although Research Affiliates will be left without any patent protection for what the Court acknowledged “may well be an inventive idea”, it would be unusual for owners and creators of such technologies not to also have other intellectual property rights that protect their technology. In relation to business methods, or schemes, those rights – in particular the copyright, trade secrets and/or know-how bound up in the product and its software – may be more valuable than patent protection.